This summary is based on the third quarter fiscal 2008 earnings call conducted by Gymboree Corp. (GYMB) on November 19, 2008.
Management:
President: Kip Garcia
Chairman and CEO: Matthew McCauley
VP of Finance: Jeffrey Harris
COO and CFO: Blair Lambert
Key Investor Issues:
- Q3 total net sales were $264.1 million compared with $250.7 million in the year ago period.
- Third quarter merchandise inventories per square foot was $83 versus $88 in Q3 last year.
- Q4 EPS are estimated to be in the range of 92 cents to $1.
Third Quarter Financial Highlights:
The net retail sales for the 13 weeks ended November 1, 2008 were $261.3 million.
- This represents a 6% increase versus the $247.6 million in net sales from retail operations reported for the 13 week fiscal quarter last year.
- Other revenue for the quarter attributable to the Play and Music operation was $2.8 million, compared with $3.2 million in the prior year.
- In total, net sales for the quarter were $264.1 million versus $250.7 million for the prior year, an increase of 5%.
The comparable store sales for the third quarter decreased 2%.
- During the quarter, the management reported an increase in the total number of transactions and decreases in the average unit retail and units per transaction.
- The total number of stores open at the end of the quarter was 873, including 585 Gymboree Stores in the U.S., 29 Gymboree stores in Canada, 112 Gymboree Outlet stores, 110 Janie and Jack shops and 37 Crazy Eight stores.
- During the quarter, the company opened 39 new stores consisting of 9 new Gymboree Stores and 8 new Gymboree Outlet stores.
- The management also opened 9 Janie and Jack shops and 13 new Crazy Eight stores.
- The company reported one Gymboree store closure.
- The total square footage under management at the end of the quarter was 1,706,000 square feet with average store size at roughly 1,954 square feet.
Third quarter gross profit increased 130 basis points to 51% compared with 49.7% for the same quarter the prior year.
- The improvement was the result of the company’s continuing product cost reduction strategies, leveraging of buying costs and higher average unit retails in the core Gymboree brand.
- This was partially offset by increased occupancy costs and lower average retails in the other brands.
Quarterly SG&A as a percentage of sales was 31.9% of sales versus 32% in the prior year.
- The decrease was primarily driven by reductions in marketing, professional fees, operating supplies, communications and travel partially offset by higher compensation.
- Excluding non-cash stock based compensation expense; SG&A fell by 70 basis points versus the third quarter of the prior year.
The third quarter operating income rose 13% to $50.2 million versus $44.4 million in the third quarter of the prior year.
- As a percent of sales, operating income posted an impressive 130 basis point increase and 19% of sales.
- The tax rate for the third quarter was 38.5% versus 40.4% in the prior year.
- The lower tax rate was due in part to tax benefits associated with international operations partially offset by additional state tax accruals.
Net income increased 15% to $30.9 million versus $26.9 million last year.
- Earnings per share increased 16% to $1.06 per share compared with 91 cents in the prior year.
- The earnings reportedly include a loss of roughly 3 cents per share associated with Crazy Eight.
Cash, cash equivalents and investments at the end of the quarter were $93 million with no short or long-term borrowings outstanding.
- Inventories at the end of the quarter increased to $142 million versus $130.5 million in the prior year.
- On a per square foot basis, inventories decreased 6% compared with the prior year.
- The gross CapEx for the quarter were $16.2 million.
- The management reported depreciation expense for the quarter of $8.8 million.
For the Gymboree brand, the strongest performing lines for the third quarter included Fall One which set in mid-August.
